Trade deal sees India buy more US oil, defence goods and aircraft

India has agreed to step up purchases of petroleum, defence goods and aircraft from the United States, while partly opening access to its closely protected agriculture sector, according to a government official, as the two countries move to ease trade tensions that had persisted for months.

US President Donald Trump announced a trade deal with India on Monday that cuts American tariffs on Indian goods to 18% from 50% in exchange for India halting purchases of Russian oil and reducing trade barriers.

Trump said India had agreed to buy more American products, with total purchases rising to as much as $500 billion, covering sectors including energy, coal, technology, agriculture and other goods.

The Indian government official, who declined to be named, said New Delhi had committed to buying US goods such as telecommunications equipment and pharmaceuticals, and had also offered market access for some agricultural products as part of the agreement.

India recently offered selective market access for agricultural products to the European Union under a separate trade deal. The Asian nation has also lowered tariffs on imported cars to meet Washington’s immediate demands and conclude the first tranche of the agreement, the official added.

India’s trade ministry did not immediately respond to an e-mail seeking comment.

Indian government data showed exports to the United States rose 15.88% year-on-year to $85.5 billion in January–November, while imports stood at $46.08 billion during the same period.

“The commitment to buy US products covers sectors like pharmaceuticals, telecom, defence, petroleum and aircraft. It will be done over the years,” the official told Reuters. The official added that negotiations on a more comprehensive agreement with the United States would take place over the coming months.

Deal lifts sentiment

The announcement of a trade deal between India and the United States has reduced a significant amount of global uncertainty, India’s economic affairs secretary Anuradha Thakur said at an event in New Delhi on Tuesday.

The deal also lifted investor sentiment. India’s benchmark stock index, the Nifty 50, rose nearly 3%, while the rupee climbed more than 1% to 90.40 per dollar in early trading.

The 18% tariff offered to India is lower than those applied to several Asian peers and comes at a time when exporters are negotiating annual contracts with U.S. buyers, the official said.

Among Asian countries, U.S. tariffs on Indonesian goods stand at 19%, while tariffs on products from Vietnam and Bangladesh are set at 20%.

“Lower tariffs will not only improve price competitiveness but also help Indian exporters integrate more deeply into U.S. supply chains,” said S.C. Ralhan, president of the Federation of Indian Export Organisations.

Moody’s Ratings said in a statement on Tuesday that reductions in U.S. tariffs on most Indian goods would reinvigorate India’s goods exports to the United States.

(With inputs from Reuters)